BMW-wise, a 2 litre 4 pot will use less fuel than a 2 litre six pot because, although they both have the same swept volume, the six pot block has a greater surface area on it's 6 bores to lose heat to.
In other words, the ratio of cylinder volume to cylinder surface area is greater on a 2 litre 4 pot than a 2 litre 6 pot, so the 6 pot loses more of the fuel's energy to heat dissipated in the cylinder walls and thence to the cooling system.
As you need to keep the heat in the cylinder to extract the energy to push the piston down the bore, you don't want to lose it to the cylinder walls.
This is why the official fuel consumption figures for the 320/325, and 520/525 show that the larger engine does almost the same mpg as the smaller engine, as it's more thermodynamically efficient, and goes faster into the bargain!
The ideal cylinder volume is around 500-600cc. Less than that and thermal efficiency falls off, more than that and engine speed is limited by the inertia of large pistons and con-rods etc.
So, ideal capacities are: 2 litre 4 cyl, 3 litre 6cyl, 4 litre V8, 5 litre V10, 6 litre V12. Of course, this is a gross simplification, but somewhere round these figures gives the best compromise between economy and rev capability.
The 325/525 is better themodynamically than the 320/520, which is why the bigger engine uses virtually the same amount of fuel, yet gives you greater power.
Bigger capacity slow revving engines are great on economy as they don't lose proportionally as much heat to the cooling system as smaller engines, and revving lower means you lose less energy to friction and 'windage', as these losses go up as the square of the engine speed.
Anyone remember the old E28 525e? Big 2.7 litre 6 pot petrol unit revving to 5000rpm max!! Would pull 2000rpm at 70mph on the motorway and return 35+ mpg. Lazy 177lbf/ft torque gave effortless step-off and thrashed 520i whilst using less fuel, even though they both had the same power.
Another thing, the E34's are very heavy cars, so will use lots of fuel in stop-start driving, and this applies whether you have a 518i or a 540i. Avoid towns in E34's! They are best at long motorway cruising where they give best economy.
Later E34 520/525 autos had the 5-speed autobox, which helped them to achieve overall mpg figures matching the manuals.
V8's are very fuel efficient for their size as they only have a 5-bearing crankshaft for 8 cylinders, compared with 7-bearings for a straight-six, and V8's are generally made big, so they have high ratios of cylinder volume to cylinder wall surface area, and this ensures less energy is lost to the cooling system as happens in small multi-cylinder engines.
In absolute terms, big V8's like to drink, but in relative terms, for their size and power, they are very efficient. My E34 540i auto returns 28-30mpg on long motorway runs, whereas my E34 525i touring auto will only manage 32-34mpg under similar driving conditions even with an engine just over half the size of the 540i's. Both cars have the 5-speed autobox and weigh about the same.
Round town the 540i returns 18-20 mpg, and the 525i returns 20-22 mpg.
However, thrashing the V8 on a cold day round town gives 14-16mpg and a big grin to petrol pump attendants!
For a given weight of bodyshell, I try to find the biggest engine you can get as it makes driving effortless.
E34 518i 4-pot is livelier then E34 520i six pot because the small six needs to rev like crazy to access the torque, whereas the 4-pot has more torque off the line.
My old E30 318i (M40 engine) was a lively little car and round town and had the legs on my E30 325i when nipping down small roads etc.
Close you eyes and it felt like a junior M3-well, almost!
Never been a fan of small engines in big cars as it's a technical mismatch. You need torque to shift the kilos, so get the bigger engine in specific engine families. That means 318i over 316i, 525i over 520i, 740i over 730i etc.
The smaller-engined cars aren't exactly bad, it's more that you don't gain much, if anything, by having a smaller engine, yet you lose that reserve of torque the bigger engines provide that makes driving effortless.
Sermon over!!